The defence sector often seems dominated by large primes, yet the 2024 Defence Industry Development Strategy (DIDS) highlights a crucial reality: small and medium enterprises (SMEs) comprise up to 80% of Australia’s defence industry. They’re central to delivering sovereign defence capability, ensuring resilience in supply chains, and driving innovation and agility in our national security environment.
Why SMEs Matter for Sovereign Capability
Recent global events and the Defence Strategic Review (DSR) underscore the need to build an enduring, sovereign defence industrial base. SMEs are at the heart of this because they:
- Boost innovation by rapidly adopting and evolving new technologies.
- Strengthen resilience through dispersed supply chains, reducing reliance on single large providers.
- Accelerate speed of development, pivoting to meet emerging needs and opportunities.
- Anchor local industry by creating jobs, skilling the workforce, and promoting regional development.
Overcoming Structural Barriers
Despite their strategic importance, SMEs can be held back by:
- Complexity in procurement – Navigating detailed contracts and tender processes can be daunting.
- Visibility & credibility – It’s challenging to build trust in a sector that prioritises proven track records.
- Cash flow constraints – Delayed contract cycles and compliance obligations can cause serious liquidity issues.
- Security & compliance requirements – Meeting strict clearance and security standards requires both resources and specialist knowledge.
A Policy Shift That Fosters SME Participation
The 2024 DIDS aims to move beyond policy “shelfware” by creating an environment where sovereign defence industrial priorities become a practical and tangible reality. Initiatives include:
- Clearer Pathways to Procurement
The Buy Australian Plan and simplified tender processes are making it easier for SMEs to navigate Defence contracts. - Focused Grants & Incentives
The new Australian Defence Industry Development Grant is being restructured with dedicated streams for innovation, upskilling, and strengthening supply chain resilience—explicitly geared to draw more SMEs into defence programs. - Strengthened Partnerships
Through expansions of the Global Supply Chain Program and “preferred supplier” mandates in priority areas, SMEs get greater access to major projects and a clearer view of upcoming opportunities. - Collaboration & Interoperability
Defence is pushing for advanced collaboration mechanisms, including co-development and co-production in alliances such as AUKUS, giving nimble SMEs an avenue to showcase niche capabilities on the global stage.
Leveraging Your Competitive Edge
SMEs can stand out by:
- Capitalising on Policy & Digital Tools
Seek government grants designed for capability enhancement and export readiness. Embrace market intelligence solutions (predictive analytics, AI) to gain a competitive edge in identifying future calls for tender. - Tapping into AIC (Australian Industry Capability) Requirements
Target the specific industrial priorities that Defence is determined to grow locally—this aligns your offerings with urgent sovereign needs. - Aligning with Tier 1 & Tier 2 Primes
Build strategic partnerships or subcontracting relationships. Large primes increasingly rely on SMEs for niche technologies and flexible problem-solving. - Investing in Security & Compliance
Meeting security standards and holding the right clearances can differentiate you in a risk-averse sector—especially as regulation tightens to protect sensitive IP and data.
From Policy to Practical Reality
For SMEs, the message is clear: we are no longer at the edge of the defence landscape but at its centre, as government and industry circles alike recognise the need for 80% of the industrial base to be strengthened and uplifted. The time is now to:
- Showcase resilience, agility, and innovative drive.
- Focus on niche areas of expertise where you can excel.
- Collaborate with primes and other SMEs to tackle larger, integrated projects.
- Engage with new funding and partnership opportunities.
Overcoming perceived barriers and demonstrating unique value is central to thriving in the defence ecosystem. The shifts heralded by the 2024 DIDS—from increased SME-friendly procurement to more robust global partnerships—show that an agile and well-prepared SME can not only enter the defence market but shape its future.
Ready to Compete and Win?
duMonde specialises in positioning SMEs for success within the evolving defence sector. Through strategic advisory, capability-building, and market engagement initiatives, we help smaller players make the most of the new opportunities emerging in the Australian Defence market.
Have questions about how your SME can achieve sustainable growth and bring essential capabilities to Defence? Let’s talk and transform policy shifts into real-world achievements.